1 / 7 100% + @ Part I: Buy a Car You are looking to purchase a car valued at $32,000 and the dealer has "pre-valued" your trade-in at $5000. Therefore you are looking to finance $27.000. Sales tax in your jurisdiction, which you should factor into the cost of the car, is 7.25%. Note that sales tax is paid on the final price of the car, not the amount financed or how much you put as a down payment. However instant rebates reduce the price of the car. The dealership is offering one of two promotions on the car you want. First let's work the numbers for these two options. Option A: The finance company offers a "low and slow" option with only 1.2% annual percentage rate over 7 years. You are financing the full $27.000. a. Find the monthly loan payment - be sure to show the formula with substituted values and how you obtained those values. b. Find the total cost of the loan c. How much interest do you pay on the car with this option 2 / 7 100% d. Find the sales tax paid on the car e. Find the total cost of the car Option B: With a current "deep discount" promotion, you receive a $4000 instant rebate taken off the cost of the car. In addition, the value of your trade-in is "increased by 25%. The loan terms are 4.5% annual interest rate for a period of 3 years. a. Find the price of the car b. Find the sales tax c. Find the down payment for your trade-in for this option d. Find the amount financed by the loan SAMSUNG 2/7 100% e. Find the monthly loan payment - be sure to show the formula with substituted values and how you obtained those values. f. Find the total cost of the loan g. How much interest do you pay on the car over the course of the loan SAMSUNG My Grades - 81937 X DU Peoplesoff selo d-3700425 dt-content-rid-25753472,1/courses/83027_22190S/Quantitative20Reasoning 20Finances 20Project%20F2021.pdf 3/7 100% h. Find the total cost of the car For both options, fill in this table. I have indicated the letter of each part of your calculations to enter. There is no need to show calculations for the difference column. You can use this table to compare the loans as you decide which option works best, OPTIONA OPTION Absolute Difference IA-B1 Mercure Option I Price of Car $ 32,000.00 Amount Financed 27,000.00 Montly Payment Interest Paid Cost of loan b Sales Tax Paid d. Total Cost of Car SAMSUNG 9 PeopleSoft sessione X My Grades - 81937 X Projects - 33027222 X 30 Quantitative Reasonix Bb Quantitative Reason X 3700425-dt-content-rid-25753472_1/courses/83027 22190S/Quantitative%20Reasoning 20Finance%20Project20F2021.pdf 4 / 7 - 100% Part II: Own & Re-Finance A House You have been in your home for about (not exactly!) four and a half years and your current monthly mortgage payment is $1.024.50. When you bought the home, it cost $293.000. You put $50,000 down and financed $243.000 with a 30 year fixed rate mortgage at 3% annual interest rate. Your home has appreciated in value considerably and you are considering refinancing to access some of that equity, perhaps to use for the car. Your credit rating qualifies you for a 2.85% interest rate with zero closing costs. for a standard 30 year mortgage. Part A- Current Situation: Let's do a quick overview of your current mortgage. I've done some of the work for you by giving you the monthly payment! Find the total cost of loan on your home if you kept the current loan o. b. How much interest would you pay over the life of this loan? You contact the bank and they inform you that after making exactly 53 payments, your balance owed on the loan is $219,400. (do not overthink this part, these are not ricks!) How much have you paid down on your principale SAMSUNG My Grades - 81937 x 19 Peopleso session X Projects - 33077 22 x Quantitative Resex 0 Quantitative Restor dav/pid 3700425-dt-content-rid-25753472_1/courses/83027_22190S/Quantitative20Reasoning 20Finance%20Project 20F2021.pdf + 021.pdf 100% d. _ Find the total you have already paid to the bank in monthly paymonts. How much interest have you paid on the loan so for? Hnt. Ute the answers to parts condd to determine this) Part B - Amount you can Finance: Use the initial Value Formula for those calculations, You are pre qualified for up to $1250/mo. Find the maximum you can finance under the new terms. SAMSUNG 5 / 7 100% b. b Find the total cost of this loan (hint, this is an easy one!) How much were you able to "cash out" by refinancing mist the amount you can borrow minus the outstanding loan balance.) Part IV: Finance the Car by Refinancing My House? Recap: Your current loan balance is $219,400 after making 53 payments of $1,024 50. With your current mortgage, the total cost of your home loan was You have payments remaining for a total of (Z) "Z" is the total remaining cost of your home if you pay out the existing mortgage. If you are going to pay for your car from proceeds of "cashing out" by refinancing your home. you will be paying the full $32,000 for the car. Let's then assume that you can get $2500" for a private party sale of your used car so that you need to "cash out" (in other words finance) $29,500 to properly compare to the dealer financing scenarios. (is may seem low, but trade ins are often well over for market value for such soles not to be confused with fair market value of the cor if you were going to purchase from a dealer with the assurances financing etc. that go with those soles) SAMSUNG 6/7 100% + 14 You need to finance $219,400 + $29.500 = $248,900 Loan terms: 30 years, 2.85% annual interest a. Find the monthly payment to finance the $248,900 $ b. The total cost of the new loan is: C. Find the difference between (z) on the previous page and part "b" above. This is the ultimate cost of your car. Cost of your car through refinance: (W) Part II: Financial Decision Making Buying the Car from the Dealer: I is a "no brainer" that in an ideal world, we would all choose the loans such that we pay the absolute minimum in interest/overall. Finance Part III: Financial Decision Making Buying the Car from the Dealer: It is a "no brainer" that in an ideal world, we would all choose the loans such that we pay the absolute minimum in interest/overall. Finance companies and auto manufacturers that have their own finance companies offer incentives to maximize their bottom line. If you cannot pay, they assess late penalties. If you default (stop paying) on the loan, they have the title on the car and can repossess it. if you play the game and have the resources to do so, you can save a lot by taking advantages of incentive. With that in mind: (A) Which CAR loan scenario (Option A on Option B from Parti) is the "no brainer"? Explain by providing a few numbers from the table. There is no right or wrong answer to this second question. You can use your personal views/situation or speculate using a hypothetical I will suggest things like the ability to reliably make payments for the full term of the loan percent of income for the loon, etc (B) Discuss a situation where you might choose the "lesser" option to finance your vehicle. Include some comparison values from the table these can be the same ones cited in ) and how they are acceptable" to you for the reasons you state in your situation, 7 7 7 100% + 3) There is no right or wrong answer to this second question. You can use your personal views/situation or speculate using a hypothetical. I will suggest things like the ability to reliably make payments for the full term of the loan percent of income for the loan, et (B) Discuss a situation where you might choose the "lesser" option to finance your vehicle. Include some comparison values from the table (these can be the same ones cited In "A") and how they are "acceptable" to you for the reasons you state in your situation. (C) Refinancing the home to pay for the car: This option is often attractive due to low monthly payments. However the home is used as collateral for the home and the cor. Do you think it is a good idea to use this option to purchase the cor? Explain